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Funds delivering consistent top quartile returns increase

21 April 2020

The number of funds generating consistent top quartile returns increased in the first three months of 2020, despite severe turmoil in the financial markets as a result of the Covid-19 pandemic. 

The number of funds that achieved top quartile returns over a three-year period rose to 3.9% in the first quarter, equating to 42 out of 1,077 funds, up from 2.2% during the final quarter of 2019, the Q1 2020 BMO Global Asset Management Multi-Manager Fundwatch survey revealed.

The IA North American sector had the highest proportion of funds with top quartile performance for the period, with 14.1% funds hitting the mark. In contrast, the IA UK Equity Income and IA Strategic Bond sectors failed to deliver any funds that reached this level of consistency, BMO Global Asset Management said.

Meanwhile, 169 of the 1,077 funds delivered above median returns in each of the last three 12 month periods. The IA North American sector was shown to be the best performer, with 25.9% of funds achieving above median returns over this time period. It was closely followed by the IA Emerging Markets and IA Japan sectors, with 20.4% and 19.5% respectively.

However, BMO said the first quarter of 2020 saw significant falls for the vast majority of IA sectors, with the IA UK Smaller Companies sector suffering a 30% drop and the IA UK Equity Income Sector falling by 28.4%. The IA UK Index Linked Gilt sector was the best performer, gaining 7.3%.

Kelly Prior, investment manager, BMO Global Asset Management’s Multi-Manager team, said: “To say that the first quarter of 2020 is one that will live on in the memory of many is a mild understatement. While most IA sectors lost ground in this quarter, our survey reminds us of one of the important principles of investing which is to focus on long-term horizons and try tlo look through short-term noise.

Prior added: “The number of funds achieving consistently top quartile returns over three years was well within the historic average, showing there are funds which are weathering the storm. Given the volatility that we are likely to see from here, it is as important as ever that investors look under the bonnet of funds when carrying out due diligence, and portfolio managers seek out companies with better-quality balance sheets who ultimately can withstand this market environment over the next quarters.

“Now is the time for active managers to step up and shine.”

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